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Why Is Amkor Technology (AMKR) Down 7.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Amkor Technology (AMKR - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amkor Technology due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Amkor Technology Q3 Earnings & Revenues Top Estimates

Amkor Technology, Inc. reported third-quarter 2018 adjusted earnings of 24 cents per share, surpassing the Zacks Consensus Estimate by 6 cents. Moreover, earnings were up 71.4% sequentially and 4.3% year over year.

Also, revenues of $1.144 billion surpassed the Zacks Consensus Estimate by 0.41% and were within the company’s guided range of $1.10-$1.18.

The company has been making efforts to channelize its resources in important growth areas like MEMS and sensors business, which focuses on mobile and automotive applications.

The company remains optimistic about growth in the automotive business. Per market forecast, the automotive market will grow in high single digits in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit going ahead.

In addition, management expects 5G to act as a major catalyst in the smartphone market, and also anticipates incremental opportunity for Amkor Technology in this large market.

Revenues

Revenues of $1.14 billion increased 7.3% sequentially but decreased 0.4% year over year. The increase was driven by particular strength in mobile communications. The communications segment benefited from iOS ecosystem customers’ incremental demand.

Also, strong demand for advanced system-in-package (SiP) and automotive strength aided revenue growth.

Revenues by Product Lines

The revenue mix in terms of product lines is discussed below.

Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 51% of third-quarter revenues. Revenues increased 17.3% sequentially and 3.4% year over year.

Mainstream Products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining 49% of third-quarter revenues. Revenues decreased 1.4% sequentially and 4.1% year over year.

Margins

Per the press release, gross margin was 17.5%, up 160 basis points (bps) sequentially but down 200 bps from the year-ago quarter. The sequential increase was backed by higher revenues.

Operating expenses of $108 million decreased 8.8% year over year. As a percentage of sales, both selling, general and administrative, as well as research and development expenses decreased.

As a result, reported operating margin was 8%, up 300 bps from the prior-year quarter.

Balance Sheet & Cash Flow

Total cash, cash equivalents and restricted cash were $550.2 million in the third quarter, up from $382.3 million in the last reported quarter. Long-term debt in the quarter was $1.27 billion.

During the third quarter, cash flow from operations was $427.2 million. Capex was $478 million compared with $669 million in the second quarter.

Guidance

For the fourth quarter, Amkor Technology expects revenues in the range of $1.02-$1.10 billion. Gross margin is expected within 13-15%. Earnings per share are expected in the range of 2-14 cents on a GAAP basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -61.91% due to these changes.

VGM Scores

Currently, Amkor Technology has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Amkor Technology has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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